Singapore Government Press Release
Media Division, Ministry of Information and The Arts,
MITA Building, 140 Hill Street, 2^nd Storey, Singapore 179369
Tel: 837-9666

Distinguished Guests

Ladies and gentlemen

Good evening

I am very pleased to join you this evening to recognise Singapore’s very own top 1000 companies and top 500 SMEs. Individually and as a group, they make significant contributions to our industries and our economy.

The Singapore economy grew by a sterling 10.1% last year. It was the highest growth rate since 1994, when the growth rate topped 11.4 %. While the growth was sufficiently broad-based, it is clear that the export-oriented sectors such as electronics and information technology were ahead of other sectors. Those that have not done well include businesses whose margins are too slim to survive in our higher cost operating environment. When these migrate to lower cost areas, the SMEs servicing them lose their business. Their "cheese" has moved, and unless they find new "cheese" they would not survive. Tonight my main focus will be on what we are doing to help our SMEs, to raise their productivity or to find new "cheese".

For completeness sake, however, I should mention the other broad groups of companies that are not doing well. [I outlined these twice last year. First in a National Day Dinner speech in Bukit Batok, and secondly in a live inteview on Channel News Asia.] One such group are those involved in sectors that are still suffering from the downturn of the business cycle. The Asian financial crisis deepened the downturn, but is not the fundamental cause of their problems. One such sector is the construction sector. It is still suffering from the effects of the property bubble. If that bubble had not been pricked before the Asian financial crisis, the problems would be much more severe today. The construction industry remains fragmented, when the sensible solution is consolidation. So long as it remains fragmented, they will lose out to foreign companies.

Another group that is doing poorly are those who serve only the domestic market. Our domestic market is small, and so growth is limited. Those depending solely on the local market will be marginalised. They should draw lessons from those who are doing well because they serve the wider regional or world market.

One specific sector that I will mention tonight is the retail sector. This sector is transforming, not just here, but worldwide. All over the world shoppers head for malls offering one-stop convenience with greater variety. Big stores offer products at competitive prices, even cheaper than the typical "mom-and-pop shop" because of economies of scale. At the same time, our retailers face competition from neighbouring countries. Another factor is the changing demographic profile in older neighbourhoods, where the young have moved to new towns as they marry. Obviously those who are not doing well will have to find new "cheese".

You will therefore understand that every business must adapt to change. Many of the award winners this evening have done something extraordinary in their business processes and products that differentiate them from the competition. Our enterprises need to constantly re-invent themselves to deliver superior value to their customers. Even traditional small businesses can aspire to be professional and profitable. There are examples where florists, opticians, caterers and renovation contractors have embraced e-commerce to transform their businesses to "click and mortar" operations. The recent launch of Kafe 123 shows how coffee shops can enter B-to-B exchange to strengthen their supply chain.

The Productivity and Standards Board (PSB), as the lead agency for SMEs, hopes to see that by 2003, at least one-third of the 100,000 SMEs will transact online. The Internet will become a common platform for doing business. Our SMEs must learn to use this tool. Last week, PSB launched a new incentive programme called "Jumpstart" to assist SMEs to e-enable their businesses. This is in addition to the 60 development assistance programmes that are offered by PSB and other government agencies to help our SMEs grow, with some of them developing into world-class organisations.

SMEs are an important and integral part of Singapore’s economy. They account for 90% of establishments, 50% of employment and about one-third of the gross value added of the economy. To tackle the multi-faceted issues faced by SMEs in a comprehensive manner, PSB launched SME 21 in January 2000. SME 21 is a strategic plan that aims to transform SMEs at three levels– enterprise, industry and broad-based. To ensure that SME 21 is implemented successfully, an SME 21 Implementation Committee has been formed with the support of the industry.

I am pleased to note that since the adoption of SME 21, nine new programmes have been launched: the SME Mentoring scheme, CEO Learning Circles, SME Circles, SME Hub, Best Practice Centre for SMEs (a collaboration project with NUS), Economic Value Added for SMEs, Business Fusion Programme, E-Commerce initiatives and SME March.

One of the goals under SME 21 is to make Singapore a preferred hub for regional expansion amongst SMEs worldwide. To provide a contact platform between SMEs in Singapore and overseas, the Business.Connect Programme was launched in 1997 and enhanced in 2000 to include more countries and types of businesses. Since then, more than 5,500 business matches have been made with SMEs from Australia, Belgium, Canada, Germany, Italy, Japan, Switzerland, Taiwan, the US and others.

To bring business matching into the cyberworld, PSB entered into a partnership with the US Chambers of Commerce in November 2000 to establish an e-directory called USpartnerSingapore. This initiative hopes to bring about 5,000 business matches between Singapore and US SMEs with the speed of Internet. I am told that if you fly SIA from now onwards, you will see advertorials in the Silver Kris magazine profiling Singapore SMEs as ideal business partners for foreign companies. We need to bring Singapore SMEs to the world, and the world to SMEs.

Realising how fast the competition moves, many of our SMEs are equally relentless in investing in new capabilities and restructuring. Applications for financial assistance to upgrade under the Local Enterprise Finance Scheme (LEFS) and Local Enterprise Technical Assistance Scheme (LETAS) support this observation. In 2000, successful applications for assistance under LEFS increased by 48% to 2,500 applications. Approved applications for LETAS in the same period also jumped to 3,500, 44% higher compared to 1999.

To broaden the financial instruments available to SMEs, I am pleased to announce the introduction of an alternative form of financing for SMEs called the Credit Guarantee Programme. Under this new programme, participating financial institutions are encouraged to lend to SMEs, particularly the young start-ups with viable business plans but without collateral or track record. Unlike the current situation, where interest rates are pre-determined and companies without track record stand little chance to be given loans, participating financial institutions (PFIs) can now make loans to the start-up companies at an interest rate commensurate with the risk profile. The government will continue to co-share the risk involved with the PFIs. Two hundred million dollars of loans have been set aside to help SMEs under this new initiative. Some 500 SMEs are expected to benefit in the first year.

Charles Darwin has commented that "It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change." This is equally applicable in our business environment today. With nimbleness and flexibility and the determination to transform, SMEs can create value and wealth far greater than what they have achieved in the past. Indeed, constant adaption to change is the key to survival. There is no reason why we cannot have more world-class SMEs, provided we are alert to the changes in the business environment, and look for new "cheese".

Gathered here tonight are fine examples and role models of organisations that have kept abreast of change – the Singapore 1000 and SME 500 companies. To all these outstanding enterprises, my heartiest congratulations.

Thank you.